Higher costs hit Lionsgate

Studio still beats Wall Street expectations

Higher theatrical distribution and marketing costs on pics took a toll on Lionsgate’s 2008 earnings, although the mini-major beat Wall Street’s expectations with record revenue for the fourth quarter ended March 31.

Lionsgate shares spiked 80 cents, or 8.1%, in regular trading Friday to close at $10.65, but declined in after-hours trading. Lionsgate brass are set to hold an earnings conference call with investors on Monday.

For the full year, Lionsgate reported that revenue climbed 39% to a record $1.36 billion, but the company registered a net loss of $74 million, attributed to higher distribution and marketing costs for its expanded slate of theatrical releases.

Those costs were up 118% from 2007 to $326.3 million. Lionsgate has deals with outside slate financing partners in place that will cover a little less than half of those marketing and distrib expenses, but accounting rules dictate that Lionsgate incurs those expenses in the year they occurs, and then make up the difference as revenue from those pics is generated in subsequent years.

For the fourth quarter, the company earned $29.8 million, or 22 cents per share, up 19% from $25 million, or 19 cents per share, in the same period a year earlier. Revenue jumped 54 percent to $511.5 million from $331.6 million — a bigger gain than the Street was expecting.

Lionsgate pointed to free cash flow for the full-year of $137 million as being the key benchmark of performance given the nature of its businesses. The company also pointed to its low debt ratio and strong war chest of $371.6 million in cash on its balance sheet.

Lionsgate’s fiscal 2008 loss compared with a profit of $27.5 million, or 25 cents per share, in 2007, as the company stepped up its theatrical release sked, which included 15 wide releases in fiscal 2008, compared to 10 in fiscal 2007.

Lionsgate said overall motion picture revenue for the year was a record $1.15 billion, an increase of 34.1% from $858.2 million in 2007. Driven by a slate that included “Saw 4,” “3:10 To Yuma,” “Good Luck, Chuck,” “The Bank Job,” “Tyler Perry’s Why Did I Get Married?,” theatrical revenue was $191.7 million, up 78% from $107.9 million the previous year.

Home entertainment revenue hit a record $623.5 million in the fiscal year, an 18% increase from $528.3 million in 2007, reflecting strong homevid sales of its slate, the initial impact of Blu-ray high-def title sales and record sales of $263.7 million for Lionsgate’s library titles.

Television production revenue, from such skeins as AMC’s “Mad Men,” Showtime’s “Weeds” and ABC Family’s “Wildfire,” hit $210.1 million, up 77% from $118.5 million in 2007. Lionsgate has a number of new shows in the works for the rest of the year, including the NBC horror anthology “Fear Itself,” which bows next week.

Lionsgate co-CEO Jon Feltheimer said in a statement that the company was poised to deliver “double-digit” revenue growth again in 2009. Company’s core businesses are performing well and have “set the foundation for long-term profitability,” he said.